Swiss bank Julius Baer to pay $547m on US tax probe

Swiss bank to pay $547m to settle US tax evasion probe

Julius Baer said it expects to pay about $547m (€499m) to settle a US criminal investigation into how it helped Americans evade taxes, clearing the way for other Swiss banks to resolve similar probes.

The agreement in principle between Switzerland’s third-largest wealth manager and the US Justice Department sets the penalty bar for about a dozen Swiss banks looking to resolve criminal probes of their conduct.

Seventy-five other Swiss banks avoided prosecution this year by voluntarily disclosing how they helped Americans avoid taxes and paying a total of $1bn in penalties.

Julius Baer disclosed the settlement in a statement yesterday, as it earmarked another $197m beyond the $350m it set aside in June to resolve the probe.

The Zurich-based company said it expects to conclude the agreement of the four-year investigation in the first quarter.

Chief executive Boris Collardi had said he wanted to resolve the US probe by the end of 2015.

Uncertainty around the Justice Department investigation has hampered the company’s ability to make deals, invest in renewing information-technology platforms and even return capital to shareholders.

Julius Baer said in July it planned to outline a new capital-management plan in early 2016.

“Knowing the final amount gives us more clarity on Julius Baer’s excess capital and potential for acquisitions,” said Jonas Floriani, a London-based analyst at Keefe, Bruyette and Woods.

“Reaching an agreement should be taken as a positive, even though the amount is higher than the original provision.”

Julius Baer rose 3.1% in Zurich trading, bringing the gain for this year to 5.3%.

Julius Baer has been negotiating a deferred-prosecution agreement to resolve the investigation.

Under such an agreement, a company is typically charged with a crime that is later dismissed if the firm makes a payment, complies with specified conditions, and makes a detailed statement of facts about its wrongdoing.

A US Justice Department spokesman declined to comment on the statement.

The bank reached a “comprehensive resolution regarding its legacy US cross-border business” with prosecutors working for Manhattan US attorney Preet Bharara, according to the statement.

In 2011, Mr Bharara’s office indicted two Julius Baer bankers, accusing them of conspiring with more than 180 US clients and others at the bank to hide at least $600m in assets from the Internal Revenue Service.

The accord still needs final approval from the Justice Department, and it will be filed with “related resolution documents” with a federal judge in New York.

The announcement came as the Justice Department concludes a disclosure programme in which 75 Swiss banks have avoided prosecutions.

Lawyers defending banks have said the Justice Department wouldn’t resume the criminal cases until it completed the programme.

About a dozen Swiss banks have been under US criminal investigation since Switzerland’s largest lender, UBS Group, settled with the US.

UBS agreed in 2009 to pay $780m, while Credit Suisse, the No. 2 Swiss bank, paid $2.6bn in 2014. Both admitted they helped Americans cheat the IRS.

Those still under investigation include the Swiss unit of HSBC, Europe’s biggest bank.

“Julius Baer remains committed to cooperating proactively with the DOJ’s investigation,” the company said.

Julius Baer, founded in 1890, has grown through acquisitions in the past six years under Mr Collardi, including the 2012 purchase of Bank of America’s non-US wealth units.

The company managed $299bn for wealthy individuals and families at the end of October and reported a 78% decline in first-half profit in July, mainly due to the initial provision for the US tax settlement.

The provision for the settlement will be included in its 2015 results, Julius Baer said. Even so, the bank expects to report a net profit for the year.

US authorities have been aided in their investigations by 54,000 US taxpayers who disclosed offshore accounts to the IRS since 2009, paying over $8bn in back taxes, penalties, and interest.

More than three dozen offshore bankers, lawyers and advisers have also been charged.